McDonald’s Corp. is witnessing its poorest stock performance since 2019, with shares plummeting to the lowest closing point since October 2022. The downturn, observed this Friday, is largely attributed to concerns over increasing interest rates potentially dampening consumer spending.
This apprehension stems from the stronger-than-expected September jobs data, which could prompt the Federal Reserve to sustain its rate-raising policy. The yield on the 10-year Treasury note reached a 16-year high, directly affecting consumer loans and raising concerns about a potential slowdown in business and consumer spending, as cautioned by economist Bernard Baumohl.
Interestingly, despite these market conditions, McDonald's (NYSE:MCD) has shown remarkable resilience. According to InvestingPro data, the fast-food giant has a solid market capitalization of $180.82 billion USD and a P/E ratio of 22.8, indicating strong investor confidence in the company's long-term growth potential. Additionally, the company's revenue growth for the second quarter of 2023 was 13.62%, demonstrating McDonald's ability to generate profits even in a challenging economic environment.
Moreover, McDonald's has managed to increase its quarterly dividend by 10%, reaching a record high implied yield that surpasses those of the Consumer Discretionary Select Sector SPDR ETF XLY and the S&P 500 index SPX. This achievement comes amid a broader selloff in consumer-staple stocks led by Walmart (NYSE:WMT) and Costco (NASDAQ:COST). This aligns with an InvestingPro Tip that McDonald's has raised its dividend for 48 consecutive years, a testament to the company's financial health and commitment to rewarding shareholders.
As these economic circumstances unfold, McDonald's is scheduled to announce third-quarter results on Oct. 30. The company's performance during this period of rising interest rates and robust jobs data will provide further insight into the resilience of the fast-food giant amidst challenging market conditions.
InvestingPro Tips also highlight that McDonald's operates with a high return on assets and is a prominent player in the Hotels, Restaurants & Leisure industry. These factors, combined with the company's consistent profitability, as indicated by a 16.05% return on assets in the second quarter of 2023, reinforce McDonald's position as a solid investment choice.
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